§ 1181.202. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
Accrual basis—An accounting method by which revenue is recorded in the period when it is earned, regardless of when it is collected, and expenses are recorded in the period when they are incurred, regardless of when they are paid.
Actual time method—An accounting method used for determining depreciation which counts the number of months an asset is owned in both the year of acquisition and the year of disposal.
Allowable cost—Costs which are necessary and reasonable to the proper care of Medical Assistance patients and which are identified in this subchapter.
Annual adjustment notice—The notice from the Department comptroller of underpayment or overpayment stating the difference between the total of the interim payments to a facility and the total certified costs for the facility’s audit year.
Average per diem cost—The facility’s total allowable costs for a level of care divided by the total actual patient days for the same level of care for a reporting period.
Bad debts—Amounts considered to be uncollectable from accounts and notes receivable that were created or acquired in providing services.
Cash basis—An accounting method by which cash is recorded when it is received, regardless of when it is earned and expenses are recorded when they are paid, regardless of when they are incurred.
Certified cost—The amount of reimbursement due after the application of group ceilings and other adjustments due a facility for an audit period as certified to the Department comptroller by the Department auditors or their agents.
Common ownership—A business arrangement wherein an individual, partnership, association or corporation has equity and, thereby, an association or affiliation in both the nursing facility and an organization which does business with the facility.
Facility—A county or general nursing facility that is enrolled in the Medical Assistance Program.
Fair market value—The value at which an asset could be sold in the open market in a transaction between unrelated parties.
Final per diem rate—The rate established by the Department after completion of an audit of the facility’s year-end cost report, comprised of the facility’s allowable net operating per diem rate and an efficiency incentive, if appropriate, which are subject to the limitation of the applicable group ceiling, plus rates for allowable depreciation and interest.
Group ceiling—The maximum per diem cost, excluding depreciation and interest on capital indebtedness, that may be reimbursed by the Medical Assistance Program for a facility in a specified group.
Half-year method—An accounting method used for determining depreciation which counts 1/2 year’s depreciation in the year in which an asset is acquired, plus 1/2 year’s depreciation in the year in which the asset is disposed of, regardless of when the asset was acquired or disposed of during the year.
Interest—The direct actual cost incurred for the use of borrowed funds.
Interest on capital indebtedness—The direct cost incurred for funds borrowed for capital purposes. Examples are acquisition of facilities, equipment and capital improvements. Generally, loans for capital purposes are long term loans.
Interest on current indebtedness—The direct cost incurred for funds borrowed for current operating expenses or working capital.
Interim payment—Reimbursement for MA patients by the Department to the facility based on the interim per diem rate.
Investment income—Actual or imputed income available to or accrued by a facility from funds which the facility invest or lends or which are held by others for the benefit of the facility.
Leasehold improvement—The improvements made by the owners of a facility to the leased land, buildings or equipment, with amortization taken over the useful life of the asset.
Medicare Part B service—A service for which reimbursement may be made to a facility under this subchapter and Medicare Part B.
Medicare Part B type service—A service for which reimbursement may be made to a facility under this subchapter and would be made under Medicare Part B if the service were rendered to a Medicare Part B eligible beneficiary.
Net operating cost—The total allowable cost less depreciation and interest on capital indebtedness.
Patient day—Care of one patient during a day of service. In maintaining statistics, the day of admission is counted as a day of patient care but the day of discharge is not counted as a day of patient care.
Per diem rate—A comprehensive rate of payment for the costs of covered services for a patient day.
Private pay patient—An individual for whom payment for services is made with his own resources, private insurance or funds from liable third parties but not by the MA Program.
Private pay rate—The lowest rate for a semiprivate room charged by a facility to a private pay patient for a day of care, consisting of either a comprehensive charge or the sum of a flat rate of routine services plus the result of the total annual allowable cost for ancillary services for private pay patients which would be recognized as allowable by the MA Program for MA patients divided by the total annual private pay patient days.
Prudent buyer concept—An accounting term used to refer to the price paid for items by a prudent buyer in the open market under competitive conditions.
Related party—An individual or organization that is associated or affiliated with, or has control of or is controlled by, the provider. ‘‘Control,’’ as used in this definition, means the power to influence or direct the actions or policies of another.
Source The provisions of this § 1181.202 adopted August 5, 1983, effective July 1, 1983, 13 Pa.B. 2402; amended March 10, 1989, effective immediately and applies retroactively to January 1, 1989, 19 Pa.B. 1005. Immediately preceding text appears at serial pages (131064) to (131067).
Notes of Decisions Interest Income
Income from a charitable trust paid by a trustee bank to a religious organization for the maintenance of a particular nursing home under the direction of the settlor fell within the definition of investment income as defined by this regulation. Sycamore Manor Health Ctr. v. Department of Public Welfare, No. 1625, C. D. 1994, No. 2460 C. D. 1994, 1995 Pa. Cmwlth. LEXIS 349 (July 27, 1995).
Interest income earned by a skilled nursing facility on an Endowment Fund and an Annuity Fund was investment income. Messiah Village v. Department of Public Welfare, 545 A.2d 956 (Pa. Cmwlth. 1988).
Definitions of ‘‘final per diem rate’’ and ‘‘group ceiling,’’ when considered with other Department of Public Welfare regulations, demonstrated a consistent policy of treating depreciation and interest separate from net operating costs. Twining Village v. Department of Public Welfare, 523 A.2d 1199 (Pa. Cmwlth. 1987).
Investment Income Although unrestricted gifts to a home of income from funds held for that purpose are ‘‘investment income’’ of the home office under this regulation, to be allocated on the same basis as home office costs, gifts restricted to use for components of that home that did not claim Medicaid reimbursement were not investment income of a provider or part of the home office investment income that was available for offset. Sycamore Manor Health Ctr. v. Department of Public Welfare, No. 1625 C. D. 1994, No. 2460 C. D. 1994, 1995 Pa. Cmwlth. LEXIS 349 (July 27, 1995).
Net Operating Costs
A nursing home’s investment income from a trust was ‘‘income available to the nursing home held by others for the benefit of the facility’’ and therefore was properly used to offset its interest expense. Spang Crest Home v. Department of Public Welfare, 538 A.2d 87 (Pa. Cmwlth. 1988).
No part of the information on this site may be reproduced for profit or sold for profit.
This material has been drawn directly from the official Pennsylvania Code full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.
